Last week, new theories surfaced about the real impetus for the Megaupload shutdown as further details about the recent arrests emerged. And two Mötley Crüe members weighed in about the oddities of the modern music business and what artists can do to succeed. Also, Grammy® winner Ne-Yo joined Motown as an A&R executive with hopes of reshaping its artist roster and making music a more unifying force.

Megaupload’s Fall May Not Have Been about Piracy

The dramatic shut-down of Megaupload and arrest of its founder Kim “Dotcom” last week may not have entirely been about piracy, according reports in a variety of publications, including TechCrunch and Time magazine. The move by the U.S. Justice Department could have been part of a plan initiated by the music industry to protect itself from the ramifications of Megaupload’s soon-to-be-released, disruptive music store and DIY artist distribution service.

Plans for the “Megabox” service were first released by TorrentFreak in December. While the service was still in beta, listed partners included 7digital, Gracenote, Rovi and Amazon. And Megaupload had launched a marketing battle against major music industry groups, including the RIAA and the MPAA, who showed Kim Dotcom in an anti-piracy film. The site had also sued Universal Music Group for blocking its YouTube campaign featuring a variety of major recording artists singing its praises.

But many sources speculate it was actually the impending launch of Megabox that added the most fuel to the fire, as Dotcom himself had described the service as a major iTunes competitor. Megabox had plans to offer free premium movies via its “Megamovie” site, which, along with its many music streaming and services to artists would have moved it from being a mere digital locker site to being a major transformative device for digital content.

Megabox had outlined a model that would allow unsigned artists and any other unattached content creators to sell their works through the site and pocket 90% of their earnings. Artists would have also had the option to completely give away songs and still be paid for them through a “Megakey” service. According to its founder, Megabox had potentially discovered way to get around the labels, RIAA and the entire music business.

And due to Megaupload’s gigantic size, popularity and support by some potentially influential musicians, it may have been able to succeed where other services have not yet been able to legally. According to a report by Time, the rapper (and superstar Alicia Keys’ husband) Swizz Beatz was officially listed on the Megaupload website as its CEO just prior to its shutdown. While he hasn’t been implicated in the lawsuit, and experts speculate this title was just a vanity title that emerged as part of the celebrity YouTube campaign, his presence further supported the site’s reach.

Before it closed last week, Megaupload was the 13^th most visited site on the Internet and made up 4% of all global Internet traffic. It had 180 million registered users, 50 million daily visitors and was already a service many artists trusted to distribute their digital content. Megabox was set to monetize all this and pass on a majority of its earnings directly to artists. Kim Dotcom and a handful of other executives have been charged with racketeering, money laundering and multiple counts of piracy.

Vince Neil and Mick Mars:  Where is the “Weird” Music Industry Headed?

Mötley Crüe singer Vince Neil and guitarist Mick Mars each discussed the current music industry climate this past week and talked about how artists can find success.

According to Neil, the music industry is vastly changed since his band first found fame in the ‘80s, and the many places artists now have to focus in order to be seen presents major challenges:  “… There are so many different outlets for music now. Thirty years ago, you had MTV; everybody watched MTV and everybody saw your video. There was one place to go; now there [are] thousands of places to go … it’s just harder to get everybody to look at you at the same time.”

He also said that there is not much that is “secret” in today’s business. Social media has given fans the opportunity to get closer to their favorite artists:  “I think with all the social media everybody pretty much knows everything. What you’re doing and where you’ve been and where you’re going.”

And Mick Mars stated that today’s bands are going to have to come up with new methods for delivering music to their fans, because the music industry is “getting weird:” “I think the future will have to see bands put together really cool packages that will be worth it for people to go see.”

Mötley Crüe begins a Las Vegas residency in February. Though Mars admitted he would rather be touring than staying put, he admitted he feels  hopeful that the residency will inspire other artists to start their own residencies and open up the industry to new ideas:  “I know it is a cool thing we are doing, and that we are probably going to make this possible for other bands to do the same thing. I don’t know if we are planning on doing more of this type of thing or not. We are going to have to check it out and see.”

Ne-Yo Named Senior VP of A&R at Motown

As recently-appointed A&R executive at Motown, 32-year old, award-winning artist Ne-Yo hopes to help the industry and music fans revert back to a united front, according to a report by Fox News. The Grammy® winner’s new title was announced by Universal Music on January 25. He has multiple hits as a solo artist and has written huge songs for Rihanna, Beyonce and others.

While Motown has its roots in black music, this type of music originated as art that could appeal to everyone and unite fans. And Ne-Yo said that he hopes to return to this idea in a music industry that he believes is becoming increasingly segregated:  “I want to get back to a place where everybody’s listening to the same thing no matter what race, color, creed you are …Now there’s music that’s specifically for black people and there’s music that’s specifically for white people, and I feel like the essence of … music is lost when you do that.”

In his new A&R role, he hopes to bring artists to the label that are deeply talented but also willing to work. He wants to focus on those who are driven to be working musicians, not just “one-hit wonders:”  “I definitely plan on making sure the people I bring to the industry are going to be an asset to the industry as opposed to a liability … It’s more than ‘She looks good in  a short skirt’ or ‘He looks good with his shirt off’ – it’s about somebody that has talent.”

Ne-Yo is set to release his fifth album in summer, 2012 and will be moving over to the Motown Records label himself from Island Def Jam, also a subsidiary of Universal Music.

This past week in music, industry analysts highlighted trends that have emerged during the Digital Age as experts claimed January is the best month for artists at all levels to release an album, and a study of the Billboard chart system showed that artists who show up on these charts only spend about five years there. Also, the file-sharing giant MegaUpload was finally shut down by the U.S. Department of Justice and labeled a “mega conspiracy.”

Want to Make it Big? Release Something in January

January has long been labeled a “dead month” in the music industry. But a study of artist releases – both major label and independent – conducted by the Independent showed it could actually be the perfect time for particularly emerging or lesser-known bands to sell more albums and register on the charts. And scoring a #1 hit is a good move for any band, as it increases sales, radio airplay and can garner better spots at live music festivals.

Since 2006, January releases have catapulted quite a few independent bands and artists to #1 on the charts, including The Arctic Monkeys in 2006 (Whatever People Say I Am, That’s What I’m Not) and The View in 2007 (Hats off to the Buskers). And Adele’s #1 success in January, 2008, 19 inspired her to release her album 21 in January 2011, an album which sold 200,000 copies in its first week and made her the best-selling artist of last year.

What is the advantage for artists of a January release? The biggest benefit is that sales of just 30,000 albums can earn them a #1 spot, whereas in other months, that sales figure would have to be about three-times that much.

This year, new artist Lana Del Rey is hoping to replicate Adele’s formula for success by releasing her debut album at the end of this month. However, in competition with her will be Adele herself as well as more established artists Bruno Mars and London indie band The Maccabees, all releasing their third albums the same week.

Experts say the real reason January can be such a prime month for new artists in particular to get noticed is because it is during this time of year that the media and music fans are hungriest for something new. According to John Hirst from HMV, there has typically been six weeks of silence after Christmas and “…When no one’s released a record for two months the public’s appetite is for something new. It’s easier to get media attention and positive reviews so an album can over-perform.”

How Long is the Career of a Billboard Artist?

Artists who make Billboard charts are there for only about five years on average, according to a study  spend on average only about five years  A recently-released professional study conducted by Storm Gloor, MBA at the University of Denver’s College of Arts and Media (CAM) and published in the 2011 Music and Entertainment Industry Educators Association (MEIEA) Journal. And according to Gloor, more than one-third who make the charts will be “one-hit wonders.”

This study is based on analysis of Billboard charts and other pop music data and is phase one of a research project designed to figure out how artists’ popularity and the length of their careers have been impacted by the huge music industry shift brought on by the digital revolution and other major events of the past 15 years. This first part of the study analyzed over 50 years of Billboard music charts.

The official results were that artists stay on Billboard charts in some capacity from 3.95-6.16 years and that 34-percent of those whose debut albums – of any genre –hit the charts only appear there once. However, with pop artists, that figure is 50 percent.

Gloor said the results of this study will be particularly important to aspiring artists who want to plot out real, long-lasting careers in music:  “The research is important to aspiring artists in understanding their own long-term planning in light of such realities. They need to know what they are facing as they start planning for their careers and beyond.” He also said this information could help labels, as they will be able to use it to create more effective promotional strategies for their artists going forward.

The second part of Gloor’s study will involve an examination of music business trends and how they affect the popularity of artists who make the charts. According to Gloor, his initial findings have been that artists who chart might gain national popularity faster, but will not likely stay in the spotlight for long.

MegaUpload Shut Down by Feds

One of the world’s most formidable file-sharing websites MegaUpload finally bit the dust on Thursday as it was shut down by the U.S. Department of Justice for violation of piracy and copyright laws. The feds issued an indictment declaring that MegaUpload was a “mega conspiracy” and labeled it a global criminal organization stating its members “engaged in criminal copyright infringement and money laundering on a massive scale.”

The indictment also charges MegaUpload executives with earning $175 million through subscription fees and advertisements and taking $500 million in royalties from movie producers, authors, musicians and other copyright holders.

According to an article in The Washington Post, prosecutors stated that the company attempted to hide the fact that they were paying users to upload illegal movies and music and used the financial windfall this practice created for a “lavish lifestyle.” Federal agents confiscated dozens of luxury autos, including site founder Kim Schmitz’s, aka “Kim Dotcom”’s Rolls-Royce, which sported the license plate “GOD.”

Of course, MegaUpload is just one of a number of services that provide file sharing online. Sites such as Mediafire and Rapidshare and also cloud storage services like Box.net and Dropbox also offer easy ways to share content. This shutdown and the potentially impending SOPA and PIPA bills – which brought about internet-wide protests by Craigslist, Wikipedia and Google last week – has many running legitimate services concerned about their future and whether or not the government has the right, even in the absence of a passed bill, to shut sites down for hosting pirated content without allowing the companies to defend themselves in court first. As Eric Goldman, a professor of intellectual property law at Santa Clara University said, “They will wonder if they have done anything different from MegaUpload, and does that mean the Feds will come through their door?”

One detail that made MegaUpload different was that it managed to get celebrities on board to support it with its online marketing campaign featuring Kanye West, Lil’ Jon, Sean “Diddy” Combs as well as Russell Simmons and director Brett Ratner, who all professed their love for the site in a series of promotional videos.

The indictment against MegaUpload was unsealed Thursday, but was issued by a federal court in Virginia on January 5. The Justice Department released a statement with the indictment:  “This action is among the largest criminal copyright cases ever brought by the United States and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime.”

Authorities were dispatched last week to arrest three MegaUpload executives employed by its two companies Megaupload Ltd. and Vestor Ltd. in New Zealand, including the site’s founder, Schmitz. The indictment also charged the two companies with running a “racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering and two substantive counts of criminal copyright infringement.”

In retaliation for the shutdown on Thursday, a hacker group named “Anonymous,” linked to the Twitter accounts @YourAnonNews and @AnonOps took down the websites for the Department of Justice and Universal Music as well as for the Recording Industry of America and the Motion Picture Association of America.

The Justice Department also seized 18 additional domain names linked to the case.

Happy New Year! In this last week of the year, technology innovation was highlighted as Megaupload launched a new online music locker and a Spotify executive shared her thoughts on the powerful present and future of digital music. Also, Reuters announced that the music industry has finally seen a profit in 2011 for the first time since 2004.

Megaupload’s New “Megabox” Music Storage Space Launched

The controversial file-sharing site Megaupload announced the arrival of Megabox, a web-based online music locker and player and fully-integrated music store. But an article published on the Billboard.biz site, the company may face some significant challenges.

Based in New Zealand, Megabox works similarly to many other online music lockers, including Google Music, Amazon Cloud Drive or mSpot. Music is uploaded using Megaupload’s file-uploading application Megakey and sent directly to the user’s online locker. While the website does not indicate exactly how much storage space each user gets, information implies that it is capable of handling anyone’s entire music library.

Megabox also has a social networking component that allows people to search for and follow friends and send messages to them using the service.

And the music purchasing element of Megabox is its least striking component, though it is connected to Amazon and 7digital. Information about available music comes from Sony’s Gracenote service.

But Megabox will likely have some legal issues to overcome. History has shown that P2P services can create successful free file-sharing services that attract significant numbers of users. But legally-created stores and viable services are a much different story in the digital space. Limewire tried its hand at an MP3 store, but the service shut down late last year. And iMesh debuted a service that mimics P2P in 2005 after settling its lawsuit with record labels.

Over 50 million people use Megaupload daily, and the site accounts for 4 percent of Internet traffic worldwide. The key to Megabox’s success could lie in being able to appeal to its global popularity and huge user base.

Some Quick Music Industry Predictions from a Spotify Executive

Spotify’s VP of marketing, Angela Watts last week shared her assessment of the digital music space in 2011 and gave her forecast for 2012 in an interview with The Guardian. While she focused her statements heavily on the influence her company specifically has had on the music business, she did offer some insightful words about how innovations in online music has changed the way people use it to connect with each other.

She named 2011 as a “watershed” for the music industry:  “The line between music access and ownership is blurring now that you can listen to whatever music you want, wherever you are.” And she added that new streaming services have expanded music listening and discovery into a collective experience that creates an ongoing conversation:  “We’ve seen a big psychological shift with the realization that you don’t need to own music, that your musical universe can be blown wide open by not only having all of your tunes at your fingertips, but that of your friends, your favorite artist … Music forms such an important part of people’s lives and is to be given the power to discover, share and enjoy an unlimited amount.”

In this interview, Watts also hinted that the Spotify platform would be significantly expanding its apps offering in 2012.

Music Industry Profits Officially Up in 2011

Year-to-year comparisons put 2011’s album sales up from 2010, so says a report released by Reuters. Though the Soundscan sales year does not end until January 1, numbers show that by a small margin of 1 percent, this year will mark the first year there hasn’t been a profit loss in the music business since 2004.

In 2010, sales had dropped 13 percent since 2009. And before that, they had been steadily declining by an average of 8 percent annually since the early-mid 2000s as the industry adjusted to the rise of digital music.
But there is concern among experts, as the big successes of 2011 will not be very easy to recreate in 2012. The two highest-selling albums were Adele’s 21 and Michael Buble’s Christmas. And neither of these artists represent what has made for the typical “hit.”

Reuters also provided a rundown of what was successful and what failed in 2011. The following are the top three:

1. “Retro.” Adele and the Black Keys gained popularity by making older music fans nostalgic and reinvigorating the idea of the “throwback” in a way that also appealed to the a younger generation. (And Adele’s 21 album should hit just under 6 million sales by January 1.)
2. The return of the Christmas album. Every year there is a strong Christmas album seller. And this year, everyone bet on pop star Justin Bieber’s release. However, Michael Buble beat him out by almost a million copies, selling 1,964,000 units. Buble’s Christmas is currently the #3 best-selling album of 2011 and will likely take over Lady Gaga’s #2 spot when the sales year closes.
3. The decline of the big rock band. While U2 set a record for the highest-grossing tour of all time in 2010-2011, some of the biggest rock bands of the 2000s fared much worse. Evanescence only managed to sell 284,000 units of its long-anticipated third album (hitting only 101 on the charts). And Coldplay only sold 877,000 copies of Mylo Xyloto, compared to their last album, which sold 721,000 copies within its first week alone. And the Red Hot Chili Peppers only managed to unload 458,000 of their new album, compared to their last one which sold 2.5 million.

With digital music still on the rise (and music retailers ever shrinking), many wonder whether or not 2012 could possibly offer another surge – or even a flattening out – for the music industry.

This past week, lawsuits loomed as Megaupload sued Universal, and Sony and Warner both lashed out against free streaming service Grooveshark. Also, the head of digital at Universal Music shared his thoughts on the likely future of the music business.

Tables Turned on Universal Music Group (UMG)

In recent years, whenever there has been news of a lawsuit in the music industry, the story is usually about a major record label suing a digital music provider over copyright issues.  However, last week the story was the opposite: Megaupload – a Hong Kong-based popular file-sharing site – filed suit in California on December 11 against UMG after the label blocked an original promotional music video created by Megaupload from YouTube, according to an article published last week in The New York Times.

The “Mega Song” video was posted on December 9 and featured pop stars such as Will.i.am, Kanye West, Mary J. Blige, Diddy, Alicia Keys and many others. They sang and spoke in support of the Megaupload site. Footage of their performances was interspersed with stats about the file-sharing service. Hours later, the clip was taken down by YouTube when UMG claimed copyright infringement.

The video seemed to be an original composition created by the file-sharing site, with the total consent of the artists. However, a spokesperson from the major label stated the reason for the take down as “unauthorized use of a performance from one of our artists,” though the artist has not been identified specifically. The Hollywood Reporter speculated it was Will.i.am’s lawyer Ken Hertz who filed a takedown notice and claimed the artist had not agreed to appear.

In the lawsuit, Megaupload states that all artists appearing in the video signed release forms that permitted the footage to be used for promotional purposes. In a statement, Megaupload’s lawyer, Ira P. Rothken said that every artist shown in the clip had signed an all-encompassing release form.  He added that the case was not even necessarily about copyright issues:  “Each star was completely aware of what they were doing and the things they said.”

The Digital Millennium Copyright Act protects YouTube and other similar sites if they unknowingly host illegal content, as long as they respond immediately to takedown notices. Rothken declared that the takedown incident is also a case of a major record label attempting to fight against free speech when it doesn’t agree with the actions of its artists.

Grooveshark Under Fire … Again

Sony Music Entertainment and Warner Music Group are set to sue free streaming service Grooveshark last week over copyright infringement, joining a lawsuit filed in Manhattan by Universal, who claimed the service had violated copyright laws with the help of its executives.

Even though three of the four major labels are gearing up to go head-to-head with Grooveshark, not everyone in the music industry is against the company, which allows its users to upload songs in their own collection and share them through streaming with other listeners.  The New York Times revealed the service has garnered the attention of several major advertisers , including Mercedez-Benz. And the company holds licensing agreements with a number of indie labels and with Merlin, an overarching organization that represents thousands of micro labels.

Once again, the Digital Millennium Copyright Act came into play, as Grooveshark claimed its music service is protected, as a company that provides third-party content and continues to comply with takedown notices filed by original copyright holders:  “We respect the intellectual property of all artists, and our strict policies are designed to ensure that our users only upload content to which they are entitled.”

The recent suit from Universal stated that Grooveshark’s executives had uploaded thousands of songs themselves, claiming to have proof in the form of e-mails from the company’s executives that bragged the company had been able to grow significantly without paying any record labels. The label also claimed that they had filed thousands of takedown notices, but continued to see the same music appear. Sony and Warner are expected to have similar evidence.

If Grooveshark is found guilty of breaking copyright laws, federal statutes could command penalties of as much as $150,000 per song.

UMG’s President of Global Digital and the Future of Music

Rob Wells, who has overseen digital at Universal – home of superstars like Lady Gaga and U2 – for just over a year recently spoke to CNET about where he feels the music industry is headed. A self-professed lover of Spotify, he has regularly stated that he plans to take a very “progressive” approach to digital music.

When asked about whether he thought the music industry might finally be emerging from its slump and ditching some of its old attitudes about technology, he discussed the shifting attitudes of the music fan:  “I have a very macro view of the industry …  Consumers [globally] are invigorated again about music. They’re invigorated about new services. They’re invigorated about new devices, which are driving adoption of new services. In five, to 10 years, when we compare back a bit and look at this massive transition and upheaval of the business, I’m hoping 2012 will be an important year … not just from a digital perspective, but [from a] repertoire perspective.”

Wells was also asked whether he saw any one music service as having the “momentum” to change the playing field, and whether any of the current services would be capable of taking down the dominant iTunes. He believes the rejuvenation of the music industry will not necessarily be about knocking down existing services to make way for new ones:  “The phenomenal thing we’re seeing is that all of these services are happily coexisting. We haven’t seen a decline in any existing service’s revenue alongside the launch of a new service or new model in any existing markets … These new platforms and services are all complementary.”

He added, “This stuff about digital revenues and how freemium will have fun at the expense of other services is kind of irrelevant because it’s incremental money. What we try to ensure is that there is plenty of clear air for every service to exist. “

And what are Wells’ thoughts on piracy, which obviously continues to be a hot topic with the potential looming changes in copyright laws as they relate to digital and online content? He thinks the business needs to go back to its heart:  consumers/music fans. “… Since piracy continues to be a challenge, we work to ensure that all of these services can happily coexist because ultimately this is about consumer choice. And the consumers are kind of favoring some services above others and of course you’re getting some churn, but what we’re not seeing is consumers churning away from richer revenue streams onto lesser or cheaper revenue streams.”